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EDITORIAL
Highlights in this Issue
Ryanair and German Airport Subsidies
p. 2
The Low Cost Air Transport Summit 2008
p. 3
Europe to Change the Airlines’ Online Sale Methods
p. 7
Mitigating Rising Fuel Costs p. 8The Predicament of Flybe
p. 10
Air Scoop - July 2008
www.air-scoop.com
The Low Cost Carriers Analysis Newsletter 
Air Berlin: Crisis Detected!
H
igh fuel expenses seem to have signicantly inuenced AirBerlin’s ight path but the carrier tries its best to adapt tonew circumstances. Though Air Berlin is the third biggestbudget carrier in Europe, it is not guaranteed against losses. Having warned of tough times ahead, Air Berlin dropped 7 per cent, whichis the lowest since May 2006 when it was listed on the Stock Ex
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change.In order to make up for additional costs, the carrier will launch a cost-cutting programme which means reducing domestic and long-haulroutes starting November. At least 10 per cent of its ights will begrounded including those to Beijing and Shanghai, Cape Town, Wind
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hoek, Bangkok, to New York, Mauritius and Sri Lanka. The airline’scost-cutting measures will also result in cutting down administrativestaff at DBA, a Munich based LCC it owns.Overall, Air Berlin has revised its earnings forecast and cut the initialforecast twice. Some analysts believe that the cost-cutting plan appea
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red too late and that it is not able to stave off the threat to Air Berlin’svery existence posed by a sharp rise in fuel prices.Air Berlin appeared to be a stunning but short-lived success. Itsgrowth and acquisition of DBA, LTU made it Lufthansa’s biggest rivalin Germany. The acquisition of Condor, which has not been yet ap
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proved by German competition authorities no longer seems feasiblein the nearest future. What’s more, Air Berlin also reported certainproblems with LTU integration. With the help from DBA, LTU andCondor, Air Berlin planned to increase its passenger ow. To date,the carrier has to reduce the number of planes by 14. However, theChief Executive Ofcer Joachim Hunold hopes that this reductionwon’t affect the number of passengers as the efciency plan envisagesadditional ights on high-demand routes. Any further expansion fallsunder question as well. Most likely, Air Berlin will have to reconsiderits order for 25 Boeing 787 long-haul aircraft that were planned to bephased-in between 2013 and 2017.At the core of the current crisis experts see Air Berlin’s aggressiveexpansion strategy which nally took its toll. Towards the end tofocus on long-distance ights, Air Berlin bought two carriers and ope
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ned routes to China, Thailand, to the Caribbean and New York. AirBerlin showed itself as growth-oriented but it was cut back by highfuel prices.
AIR SCOOP ANNOUNCEMENTSA Glimpse of Headlines News!
Denmark blacklists six European carriers 
Copenhagen: Denmark’s National ConsumerAgency on Thursday published the names of six European airlines it said were still using illegal marketing practices, despite warningsfrom the European Commission after a reviewlast year. The Danish Consumer OmbudsmanHenrik Oe said the Internet booking sites of Ryanair, Air Berlin, Air Baltic, SkyEurope, AerLingus, Brussels Airlines as well as that of In
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ternet travel agent Seat24, contained incorrectinformation or made use of misleading booking procedures.
EasyJet ad grounded for “misleading” CO2claims 
EastJet, the low cost airline, has once againbeen reprimanded by the Advertising StandardsAuthority (ASA) for making misleading carbondioxide (CO2) claims in a national press ad. Theadvertising watchdog upheld a complaint froma viewer who believed claims made in the adconfused easyJet’s emissions per passenger withits total CO2 plane emissions.
Rising fuel cost: Experts foresee airlines’ mer- gers and consolidation 
Increased cost pressures on airlines combinedwith lower spending power among custo
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mers, could force a new round of consolida
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tion between carriers, say bankers, analysts andindustry executives. Fuel is one of the biggestcosts airlines face and the price of oil has dou
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bled in the last year, but airlines may be unableto pass on that cost as businesses and leisuretravellers face pressure to spend less as the eco
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nomy slows.
Bmibaby to cut Cardiff services 
UK carrier Bmibaby, the biggest low-cost air
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line ying from Cardiff, Wales has conrmed itis to cut ights because of soaring global oil pri
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ces. Bmibaby commercial director Julian Carrsaid cutbacks were being made to safeguard thecompany’s long-term future.More on
http://airscoop.blogspot.com 
 
BIRD’S EYE VIEW
Air Scoop - July 2008
www.air-scoop.com
2
Ryanair Gets Under Pressure in Germany for Receiving Airport Subsidies
For Ryanair, it is just a new illegal subsidies affair. At theend of June, the German LCC Air Berlin, the third low-fare airline in Europe, led a complaint with the GermanFederal Court of Justice against the Luebeck airport, inNorthern Germany. Air Berlin accuses the airport to grantits Irish rival lower charges, and thus to create unfair com
-petition.
Air Berlin’s action is not completely a surprise. Last yearalready, the European Commission launched an inquiryagainst several European airports, among which Luebeck,for similar reasons: bilateral deals offering some airlinesspecial nancial conditions, which could be considered asillegal state aid. And the contract between the Luebeckairport and Ryanair had already been suspected of illegalityby the EC... eight years ago, at the time it was signed.What is more, Ryanair is accustomed to that kind of ac
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cusations. The rst illegal subventions inquiry by the Eu
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ropean Commission against the company dates back to2002, in Charleroi. Ryanair was nally forced in 2004 topay back 30 pc of the subsidies it had received from theBelgian airport. Less than two years later, a new contractwas signed between the airport and the Irish airline, whichstill has a big hub there.After Charleroi, many other inquiries were opened by lo
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cal or European authorities all over Europe. Brussels cur
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rently examines different deals Ryanair and other airlinesas EasyJet concluded with several European airports: Pauin France, Aarhus in Danemark, Bratislava in Slovakia,Tampere in Finland, but also Berlin and Dortmund in Ger
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many for EasyJet.And just a few days before Air Berlin’s announcementabout Luebeck, in June, the European Commission openedanother investigation on the Frankfurt-Hahn airport (150km from Frankfurt), suspected of having received publicaid from the Länder of Hesse and Rhineland-Palatinate,and from its public owned mother company Fraport. TheCommission will also examine bilateral contracts betweenthe airport and Ryanair, which operates in Frankfurt-Hahnone of its major European hubs. This examination followsa complaint from a German airline.The Luebeck case, however, has something specic. Firstof all, it occurs two months after Ryanair opened its rstGerman domestic route from Berlin to Frankfurt-Hahn,directly challenging Air Berlin. Ryanair’s CEO, MichaelO’Leary, at that time even predicted the disappearance of the German LCC: according to him, Lufthansa and Rya
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nair will in a few years be the only companies operating in the German sky! This new Ryanair boss provocationshows the German market is just at the beginning of aharsh battle, and Air Berlin’s complaint in Luebeck maybe part of it.Secondly, the Luebeck case will be judged by a Germancourt, which decision will set a precedent in the country.With this trial, Air Berlin, supported by the German Asso
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ciation of Airlines, clearly wants to set an example for thenational air transport sector. What the airline is asking foris in a way the mere application in Germany of Europeanrules established after the Charleroi affair: subsidies fromairports to airlines have to be limited in time, restricted tonew routes or new frequencies, cannot be proposed to asingle airline, and have to be transparent and communica
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ted to other airlines and to European authorities.It is of course a way to attack Ryanair’s business model,partly based on more or less illegal airport subsidies, oftenpaid to the airline’s sister company Airport Marketing Ser
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vices as a counterpart for promotion actions of the destina
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tion abroad. Subsidies or airport fees reductions representimportant revenues for the Irish airline: they reach severalhundred thousand Euros per airport and per year.If Ryanair loses the German trial, its other - or at leastfuture - deals with German airports may be put intoquestion. And beyond the German market, the increasing number of illegal subsidies cases involving the Irish airlinecould soon begin to threaten its business model, and itsnancial wealth. Especially when the whole air transportsector is expected by analysts to be hit soon by a strong downturn, mainly due to record oil prices. In February,Michael O’Leary warned 2008-2009 nancial results couldbe weaker than expected. Investors are already very cau
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tious: since October 2007, Ryanair’s share has lost nearly 50pc of its value.The worst case scenario for the airline would of coursebe several condemnations similar to the Charleroi one: if Ryanair was forced to reimburse 30 pc of all the subsidiesit perceived, the nancial impact could be enormous. Rya
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nair has another point of view about subsidies and freecompetition in the European sky: according to the airline,the companies really supported by state aid and subsidiesare national leaders as Lufthansa and Air France. Ryanairregularly accuses the European Commission to protect na
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tional leaders instead of stimulating free competition.
 
BIRD’S EYE VIEW
Air Scoop - July 2008
www.air-scoop.com
3
11th & 12th June 2008, The Waldorf Hilton, LondonHigh fuel prices, an impending economic downturn and continuing environmental pressures mean that tough times areahead for the aviation industry. LCCs must carefully evaluate their models, identify new revenue streams and attract themost protable customers if survival is to be ensured in a hotly competitive and challenging marketplace. The Low CostAir Transport Summit brought together the leading gures from across the industry for incisive debate into the strategiesshaping the evolution of the low cost model. The debate revolved around how to do ancillary revenues well, the futurefor long-haul low cost and how airlines can become more environmentally friendly in their operations.
The Low Cost Air Transport Summit 2008
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